Hype-Performance Sport Compact Market Fuelled by Media, Culture

One of today’s newest and hottest automotive enthusiast markets could be evolving into an excellent long-term profit segment for the traditional aftermarket.

The sport compact modification category is not only booming with millions and millions of enthusiast participants, it also appears to be a marketing and merchandising area ideally suited to the experience, knowledge base, and operational style of jobbers.

It’s a fast-moving category, with wholesale and retail upsides; it’s both a DIY and do-it-for-me category; it demands personal involvement with customers and a background of understanding vehicle owner behaviour, their buying patterns and their retail experience preferences; and it also falls into the rapidly growing specialty equipment aftermarket category, a product area in which jobbers already have extensive experience.

In other words, sport compact modification and jobbers in many ways are tailor-made for each other. Jobbers should be able to do well with this category–both in helping installers capitalize on the do-it-for-me potential, and at the jobber store showroom level doing good retail business with effective merchandising, information, and marketing techniques and services.

The sport compact modification segment is driven by a wide variety of marketing, demographic and social factors, and is more complex than the more traditional restoration or high performance engine modification markets.

The market is dominated by the younger, 18- to 25-year-old driver. One of the biggest concerns of this consumer segment is a desire for individualization. It is also a fickle market–what is hot today in terms of a look or a particular modification can be ancient history tomorrow as enthusiasts move on to the latest modification trend. Enthusiasts are highly influenced by their peers, by media such as TV shows and enthusiast magazines, and by sport compact “community” events such as shows and competitions.

The vehicle mix of models modified is growing. Although initially dominated by the Honda Civic, enthusiasts are now turning to a variety of other vehicles and vehicle companies such as the Ford Focus, Chevy Cavalier, and new Japanese and Korean entries.

Frost & Sullivan, a U.S. market research organization with a strong automotive focus, has been tracking this segment and comments, “Demand for sport compact exterior accessories or import tuning is skyrocketing, with enthusiasts exhibiting a relentless desire for new products and technologies to achieve a unique personal style.” Paradoxically however, “The more popular a sport compact or import modification becomes, the quicker enthusiasts are likely to lose interest in it. This places extreme pressure on manufacturer product development cycles and to-market times.”

Overall, says Frost & Sullivan, “The sport compact market is expected to grow at a rate of more than 15% through to 2009, and opportunities abound for manufacturers, product developers and importers alike.”

The research organization cautions, however, that in a dynamic market such as this, an organization’s ability to be flexible is essential to its success. “Since the sport compact market is all about unique designs, a strong grasp of customer expectations and market trends is necessary to defend market position. In addition, innovation and technologically savvy advertising are necessary to attain high brand recognition.”

Mary-Beth Kellenberger, Frost & Sullivan’s foremost expert on this segment, has developed insights about the consumers in this category and the characteristics that differentiate them from the earlier restoration-oriented markets.

“There is a total revolution brought on by a fusion of fashion and product function,” she says describing the sport compact modification segment. “Contrary to their predecessors, [these] vehicle modifiers believe that production vehicles lack originality and character. The production vehicle is not the finished product but rather the canvas to which modifications are applied, allowing the vehicle to reach its full potential. Unlike restorers, most feel that the OEM’s version of the vehicle is unfinished.”

Although the sport compact market is currently the most high-profile modification segment, some experts see this as part of a larger movement.

“This phenomenon is not exclusive to the sport compact,” says Iain Buchanan, sport compact specialist at Karbelt Speed & Custom. “Many higher-priced models are also involved. We are in the age of the individual and people want to have something that sets them apart. There are a lot of brands, models, and price points involved. It is the age of personalization.”

Buchanan says he is “highly involved personally” in the sport compact segment and considers that the segment represents the vehicles of his era. “They are inexpensive vehicles to buy and they are easy to modify. Enthusiasts will often spend as much or more on the improvements as they paid for the vehicle.”

Buchanan says, for example, that it is not unusual for an enthusiast to spend $10,000 on modifications. He notes that performance is a factor in this modification segment.

“It’s not all just about appearance. These vehicles can be improved in performance, for example, to have higher performance than a higher-priced vehicle. The big trend with engines in sport compact is turbo charging and supercharging. Jobbers can sell the same high performance type of products as they do for other vehicles, except they will be specifically for the sport compact category. A lot of the trends in this segment come from racing, such as plus-size wheels,” he says.

For jobbers seeking to profit in this segment, Buchanan says that pricing, quality and branding are all very important. “Enthusiasts in this market are seeking quality but with value oriented pricing. Good pricing points are important. Enthusiasts prefer not to buy from outsiders. They prefer to deal with people who are into the scene of sport compact modification. They want to deal with suppliers and distributors who are involved in this segment. Sport compact enthusiasts consider themselves as a community and they want to have other people to talk to about their community interests.”

The current high interest in sport compact modification and people’s desire to individualize a vehicle reflects an overall cultural need and has been going on for generations, according to Rob Ford, marketing program coordinator for Keystone Automotive Operations, Inc.

“The sport compact market consists of consumers from various backgrounds all wanting their vehicle to stand out. The market is fuelled by magazines, TV shows, sport compact events such as shows, drag events and other factors,” says Ford.

In terms of potential for jobbers, Ford advises that jobbers watch OE trends closely. “Vehicle manufacturers are producing vehicles that focus on this segment. The emerging products in this category that offer potential to the jobber are the ones that add a measure of both look and performance. An increasing trend seems to be consumers focusing on speed and performance.” Some strong categories cited by Ford are mufflers, seats, complete exhaust systems, nitrous systems, cold air intake kits, super tuners, turbo systems, wheels and tires and 12-volt installs.

Look at the underlying factors driving the sport compact customization trend, says Jim Spoonhower, vice president, market research, Specialty Equipment Market Association (SEMA). “For nearly 70 years, automotive enthusiasts have known that they could have their cars the way they wanted. It’s only been recently that the average vehicle owner has learned that.

“I think it started basically with personal computers and the Internet. People learned that it was possible to have exactly what they wanted and they did not have to settle for something that was close. Add to that, over the years, the OEMs have continued to offer more and more personalization products on their vehicles. Custom wheels are a good example. Today more than half of all new vehicles sold in the U.S. have custom wheels. With that type of visibility, the consumer realized that something other than stock wheels is okay.

“Then came the sport compact phenomenon with all the media coverage and the consumer began to realize that the possibilities were even bigger than they thought. TV shows like Pimp My Ride, Over Haulin’, and Rides brought the reality of vehicle personalization right into the average vehicle owner’s living room,” Spoonhower concludes.

Within the overall aftermarket landscape, this segment has excellent potential for jobbers, but as with other specialty automotive areas such as racing, success will be enhanced by involvement in the interests of this modification community.